Growth Focus: Amaysim Australia Ltd (AYS)

by Patrick Taylor




Date of Data Capture: 7/9/2016

Name: AMAYSIM AUSTRALIA LTD (AYS)

Classification: Internet Services

Current Price: $1.99

Market Capitalisation: $359M

Forecast EBITDA Growth: 25.9%

Gross Yield: 4.97%

Consensus Price Target: $2.54

# Covering Analysts: 3

Discount at Current Price: 27.6%

Price Target Trend: Increasing

Signal Time Frame: Monthly-Daily

Trend Bias: Up-Flat Medium-Short

Indicators:
Short-term: Positive-Neutral
Medium-term: Neutral
Long-term: Positive

Recommendation: Buy

Set up Notes:
• AYS remains in recovery mode and has long-term signalling coming in positive as it tests up against $2 resistance directly overhead.
• Fundamental performance and forecasts are excellent and predict continued robust growth.
• Short-term signalling is turning positive again as it works through the resistance ceiling here.
• Volatility is always expected at these points but with the basing work that has been done since Feb 2016 there is now plenty of support layered between $1.90 and $1.70.


Growth Focus: Amaysim Australia Ltd

Our primary focus here is capital gain, we will select our stocks from the ASX top 500 All Ordinaries Index.

Mobile Virtual Network Operator Amaysim (AYS) resells Optus services from their flexible and customisable platform and represent a rare combination of fundamental and technical strength. AYS is fundamentally strong due to excellent growth shown in sales, margins and profits which are forecast to continue growing - and they have a very exciting technical picture where they are re-emerging as a growth stock after basing through a 6-month consolidation since having their value cut in-half back in March 2016. This really is what we look for in capital growth opportunities and the combined profile of Amaysim looks… literally amazing.

A good corner-stone to any recovery growth play is the well-structured reformation of an uptrend following an initial collapse into price consolidation - ideally coming after great price gains - and we have that here with AYS. They entered the market in July 2015 on a $1.75 open to hit a peak high of $3.33 just 6 months later for a quick return of 90% in capital gain. As the old market cliché goes; ‘Booms lead to busts’ and we saw that here with disappointing reporting catalysing a tipping point where the stock rolled over its support and cascaded down just over $2 for a 60% decline in less than a month.

Since then we have seen them work through basing formations, re-establish underlying trendline support and begin to work its way through the heavy blanket of overhanging resistance settling on top of it. Their price is really just beginning to emerge back through those dynamic resistance layers now and with good recent results and truly impressive forecasts in front of them, the time seems ripe to take a position in Amaysim as they set themselves up to chase old highs.

Old resistance targets at $2.20, $2.40, $2.60 and $3.00 loom large overhead and had roles to play structuring the way gains were made on the last run and we expect this to be the same this time. On the negative side (if we are making an entry a cycle or two early here) we have structural support layered down from $2.00 to $1.80, $1.65 and $1.55 with a good dynamic support cluster based around $1.90, so there should plenty of chances for us to exit without too much damage if we are wrong.

While Amaysim is still so new as to not really show the long-term monthly indicator off to its best effect, this signal has been performing well regardless, is in close correlation with the price movement and turned positive only two weeks ago. We have been waiting for the short-term daily down-cycle to finish and turn positive, which occurred yesterday so we are now happy to make the move on AYS as it seems like everything we need to be in-place is there and ready to go.

With a very impressive technical set up that is supported by robust results and forecasting Amaysim seems like it has a long-term uptrend ready to go mobile and if it does, we plan to go with it.

Disclaimer

This report was produced by Taylor Securities Pty Ltd, which is a Corporate Authorised Representative (Number 414063) of RM Capital Pty Ltd (Licence no. 221938). Taylor Securities and Patrick Taylor (Representative number 414064) have made every effort to ensure that the information and material contained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the information and material and it should not be relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, Taylor Securities and Patrick Taylor does not accept any liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report. This report is for information purposes only and is not intended as an offer or solicitation with respect to the sale or purchase of any securities or financial products. The securities or financial products recommended by Taylor Securities and Patrick Taylor carry no guarantee with respect to return of capital or the market value of those securities or financial products. There are general risks associated with any investment in securities or financial products. Investors should be aware that these risks might result in loss of income and capital invested. Neither Taylor Securities and Patrick Taylor nor any of its associates guarantees the repayment of capital. WARNING: This report is intended to provide general financial product advice only. It has been prepared without having regarded to or taking into account any particular investor’s objectives, financial situation and/or needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this document without obtaining specific advice from their advisers. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice. Where applicable, investors should obtain a copy of and consider the product disclosure statement for that product (if any) before making any decision.